The municipalities of Latsia and Yeri signed an agreement on Friday which will pave the way for them to cooperate and share various services.
The initial agreement will see Latsia technical services covering the needs of Yeri municipality.
Latsia Mayor Panayiotis Kyprianou and Yeri Mayor Argyris Argyrou said that both municipalities had been forced to adapt to the current financial situation.
They both expressed the readiness of local councillors to work together so the new cooperation could be a success and expand to other services.
The agreement is seen as being productive for both sides as Latsia will receive money for their services while Yeri will be upgrading its technical services and also saving money by not having to create a new department.
The move could be the first of many as municipalities and local councils are having to find ways to cut costs given a reduction in funding from the state. The government has been reluctant to reduce the number of local authorities in Cyprus, even though there are over 300, including 39 municipalities. However there has been talk of merging or sharing services to ease the situation.